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Banks and fintech: room for symbiosis

The Economist’s Intelligence Unit has published its fourth global retail banking report – Symbiosis: Your Bank Has Your Trust. Can Fintech Make You Love It? – which surveyed 200 senior banking executives on the topics of regulation, customer relationships, security and technology, leading the industry unto 2020. It finds an industry that still lurks in murky water, but with a clearer picture of its future as banks and fintech firms learn to navigate towards collaboration rather than presupposed rivalry.

Recently published research by The Economist Intelligence Unit, conducted on behalf of global vendor of banking software, Temenos, – Symbiosis: Your Bank Has Your Trust. Can Fintech Make You Love It? – found that banks and fintech firms can do more than coexist peacefully. In fact, both have the opportunity to benefit from one another’s competitive and strategic advantages. With reduced costs in compliance, capital, and customer acquisition, banks hold a more advantageous position than fintech firms. However, their former rivals are well positioned in the gap between distribution and technology, and are capable of leveraging innovative technology to provide quick customer service.


In surveying banking executives, the report found that regulation continues to shape strategic thinking with higher regulatory concerns in North America when compared to Asia and Europe. Current events such as Brexit and uncertainty over President Trump’s policy measures appear to be major concerns, whereas regulatory directions over product suitability and transparency are less of a concern amongst Europeans. Another key insight given related to technology and the need to adapt infrastructure to quell fears over disruptions coming from fintech, as bankers cite the indispensability of empathetic human advisors for wealthy clients.


Another key finding concerns the role of compliance in payment services, where regulation is actually supportive of banks. Though once feared, fintech payment service providers (PSPs) are able to maintain high volume, low value, and are open to security concerns as they become faster and more frictionless. This means tighter regulations for cash transfers, concern over using API frameworks, regulatory pressures from watchdogs and high costs for implementing security measures. For fintech firms, compliance costs are also high as the stability of the banking system requires preservation. In this respect, payment processors and banks would benefit from collective investment in infrastructure around secure transactions.

Cost of capital

The report also indicated that as capital rules on deposits remain volatile, technology services such as cloud computing have become cheaper and faster than five years ago. Through outsourcing to fin tech partners, the process of migration away from legacy systems towards software has become easier and cheaper. Moreover, since banks often lack prerequisites in data analytics, partnerships with smaller tech firms make them more competitive. However, banks still retain advantages as most consumers are slow to adapt to trusting new apps and digital platforms.


Finally, the report suggests that, although collaboration offers clear benefits, it is nevertheless slow to catch on, and banks must adopt to customer needs quickly. The difference in tech adoption between countries like Mexico, Peru and Chile is high when compared to North America, where tech candidates find security in banking jobs. Nevertheless, while branch numbers fall, there is speculation that digital services cannot kill the branch due to the human advantage when chatbots fail. A key concern amongst interviewees is that Silicon Valley’s progress may be misplaced when compared to the speed, size and integration of Chinese players  such as Ali Baba’s Ant Financial.

Although Asian banks are more often combining technology with physical presence in different spaces, and are quick to move, cross-border customer acceptance appears to remain in favour of those they already trust. Other areas of uncertainty include embedded corporate culture, bureaucratic banking systems, trust in cryptocurrencies and their endorsements of cryptocurrencies by central banks.

To read the full article by The Economist’s Intelligence Unit, on behalf of Temenos click here.

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